Slides of chapter 3 Portals from Book Corporate Information Strategy Management (CISM)

3. AIM
TO ACQUAINT THE BUSINESS STUDENTS
ABOUT BUILDING NETWORKED BUSINESSES

4. GROUP MEMBERS
MAJ TAVEER AHMED
MBA-5TH
MAJ FAWAD HUSSAIN
MBA-5TH
CAPT AZEEM HAFEEZ
MBA-5TH
M.QAISER
MBA-5TH
Ms AMMARAH ISHAQUE
MBA-5TH
MS RABIA KHAN
MSBA 1ST
MS SEHRISH ZAMAN
MSBA 1ST
MS GULNAZ AFZAL
MSBA 1ST

5. SEQUENCE
INTRODUCTION / NEED FOR NEW CAPABILITIES / HISTORY REPEATING ITSELF
• (MAJ TAVEER )
BLUE PRINT FOR A NETWORKED ORGANIZATION
• (RABIA KHAN )
MANAGING AND LEARNING
• (GULLNAZ AFZAL)
LEADING AND ENGAGING
• (AMARAH ISHAQUE)
BUILING VALUE NETWORKS
• (M.QAISER)
HOW SHOULD WE RELATE TO MARKET PERTICIPANTS
• (SHERISH ZAMAN)
EVOLVING MARKET STRUCTURE AND RELATIONSHIPS
• (MAJ FAWAD HUSSAIN)
MODELS / EXAMPLES / CONCLUSION
• (CAPT AZEEM HAFEEZ)
QUESTION / ANSWER SESSION
• (ALL)

6. INTRODUCTION

7. • “Our dream and our plan well over a decade ago was
simple. We set out to shape a global enterprise that
preserve the classic big company advantages while
eliminating the big company drawbacks. What we
wanted to build was a hybrid enterprise with the …
body of a big company and … the soul of a small
company”
» Jack Welch Former GE CEO

8. INTRODUCTION
•
•
•
•
•
Dilemma of todays executives.
Being big act small.
Concept of hybrid business organization.
Emergence of entrepreneur and executives.
Role of entrepreneur, executives and networked
organization, its capabilities and requirement.

9. DIAGRAMATIC LAYOUT
Need for new
cap
Is history repeating
itself
Introduction
TANVEER
Blue print for
networked organization
Building value
Networked
Operating
Mng and learning
Leading and
and innovation
GULNAZ
Engaging
RABIA
AMMARA
Where should
activities performed
QAISAR
How we relate
these activities
SEHRISH
/FAWAD
Evolving mkt
structure
AZEEM

10. 1. The Need for New Capabilities
•
•
•
•
20th century industrial economy designs.
Industrial economy era. (1980 to 1990).
Networked economy era. 1990+
Challenges faced by executives in industrial era:

11. THE NEED FOR NEW CAPABILITIES
• “We saw two challenges ahead of us, one external
and one internal… Externally, we faced a world
economy that would be characterized by slower
growth, with stronger global competitors going
after a small piece of the pie. Internally, our
challenge was even bigger. We had to find a way to
combine the power, resources, and reach of a large
company with the hunger, agility, spirit, and fire of a
small one.”
» Jack Welch Former CEO of GE.
» Quote from page 228 of Applegate.

12. NEED FOR NEW CAPABILITIES
BUILDING NETWORKED BUSINESSES
• “ABB is an organization with three internal
contradictions. We want to be global and local, big
and small, radically decentralized with centralized
reporting and control. If we resolve those
contradictions, we create real competitive
advantage”
» Percy Barnevik, CEO Asea Brown Boveri (ABB)
•
•
•
•
Sweden / Switzerland based power company.
Assets over $50 bns.
850 subsidiary company.
140 countries over 1,80k employees.

13. The
Building Orga niza tion Design Ch allenge
the Networked Business
Organization
Complex &
Global
?
Hierarchy
Simple &
Local
Entrepreneurial
Organization
Stable &
Certain
Environment
Dynamic &
Uncertain
Source: Applegate, Lynd a M., Rober t D. Austi n, and F. War r en McF arla n, Corporate I nfor mation Strategy and M anagement . Bur r Ridge, IL:
McGr aw-Hill/Irwin, 2002.
Chapter 3 Figur e 3-1

14. Is History Repeating Itself?
• Hybrid Organization design
– To improve control and efficiency while
simultaneously enabling flexibility and speed of
response
– But, hybrid designs bred conflict, confusion,
information overload, and costly duplication of
resources

15. Flattening the
Organizational Structure

16. Matrix Organizational
Structure
But, hybrid designs bred conflict,
confusion, information overload, and
costly duplication of resources

18. Is History Repeating Itself?
– Although the networked IT infrastructure can provide
important tools, it cannot define the information that needs to
be in the system.
– In addition, while the networked infrastructure can enable
new organization structures and systems, it cannot motivate
people to use the information to make decisions and take
actions on behalf of the organization.
– New organization capabilities are required to execute the
sophisticated network strategies and business models

19. RABIA KHAN

20. BLUEPRINT FOR A NETWORKED
ORGANIZATION
• Challenges
– Designing, implementing, and constantly evolving the structure
and systems that enable an organization to executes its strategies
and accomplish its goals is one of the most formidable tasks facing
21st century executives
– Continuous change is one of the most challenging issues facing
the 21st century executives
• Operating and Innovating
• Managing and Learning
• Leading and Engaging

21. Blueprin t for a “Big-Small” Business
Sample Organizational
Components
Sample Technology
Components
Leading & Engaging
•
•
•
•
•
Human Resources Management
Strategic Alliances
Customer Loyalty
Supplier Loyalty
Partnerships
•
•
•
•
•
HR Systems
Customer Relationship Management (CRM)
Personalization
Communication Infrastructure
User Access Devices
Managing & Learning
•
•
•
•
Planning and Budgeting
Performance Monitoring
Organization Structure and Reporting
Organization Decision Making and
Learning
•
•
•
•
Management Reporting
Decision Support Systems and Tools
Business Intelligence Systems
Data and Knowledge Management
•
•
•
•
•
Enterprise Resource Planning (ERP)
Supply Chain Management
Order Fulfillment
New Product Development
Distributed Information Processing
Infrastructure
Operating & Innovating
• Operating Process
• New Product Development
• Business Venturing
Source: Applegate, Lynd a M., Rober t D. Austi n, and F. War r en McF arla n, Corporate I nfor mation Strategy and M anagement . Bur r Ridge, IL:
McGr aw-Hill/Irwin, 2002.
Chapter 3 Figur e 3-3

22. BLUEPRINT FOR A NETWORKED
ORGANIZATION
• 1. Operating and Innovating
– The operating processes of a firm include all the activities a
firm and its suppliers and partners undertake to design, build,
market, sell, and deliver products and services for customers,
suppliers, and business partners.
– Ability to flexibly adapt to constantly changing business
environment is the key to success.

23. BLUEPRINT FOR A NETWORKED
ORGANIZATION
• 1. Operating and Innovating
– Hierarchical Operations
• Define rigid procedures, top down
– Entrepreneurial Operation
• Company do not depend on well-defined polices and procedures or
structured jobs.
– Networked Operations
• Big-small companies,
• Precision execution and fast-cycled innovation
• Operation is designed to fully exploit the power of both people and
technology whether this assets are in your firm or in someone else’s.
• Technology can ensure precision and people can use the information in
real-time to deal with unforeseen problems

24. OPERATING AND INNOVATING CAPABILITIES
Precision
Execution
Hierarchy
Fast
- Cycled
Innovation
Entrepreneurial
Networked

25. BUSINESS DESIGN REQUIREMENTS
Capabilities
Business Design Requirements
Cost, cycle time and quality levels are benchmarks within the industry and
exceed customer/stakeholder requirements.

Flexible, modular designs enable customization, personalization, and continuous
improvement.
- Change processes are embedded within the company’s day-to-day operations

Employees are rewarded for devising new, innovative ways to serve customers


Customer and community
connected
Streamlined, integrated, and efficient operations seamlessly link activities
performed inside the firm with those performed by customers, partners, and suppliers

Fast-cycled innovation


Precision execution
Resources for change are available.
There is a standardized and widely accepted process used to develop and
present the “business case” and implementation plan for a potential idea.

Executives and employees in all parts of the organization have the
information required to understand th e lifetime value of customers, suppliers
and partners and have the ability and authority to make decisions and take
actions to improve satisfaction and loyalty.

Incentive systems reward success in attracting and retaining profitable
customers, suppliers, a nd partners and in increasing the frequency and level
of engagement.
(Note: All key stakeholders,
including suppliers and partners are
considered “customers” of an e-business.)
-

26. GULNAZ AFZAL

27. MANAGING AND LEARNING
The management processes and structures of a firm
include all the activities that a firm and its business
community undertake to:





Plan strategy and how it will be executed
Allocate resources
Organize people into groups and coordinate work
Monitor and measure performance
Adjust strategies, plans, budgets, and organizations
based on learning

28. TRADITIONAL MANAGEMENT PROCESS
Driven from top down, incremental goals and
allocation of resources to carry them out.

29. ENTREPRENEURIAL MANAGEMENT
PROCESS
• Planning, decision making, action, and
performance management are informal and
ad-hoc.
• Ability to respond quickly on the basis of what
is being learned are fundamental to effective
entrepreneurial management

30. NETWORKED MANAGEMENT
PROCESS
Improved access to information enables
employees, customers, and partners to invent
new ways of working and to respond quickly.

31. MANAGING AND LEARNING CAPABILITIES

32. MANAGING AND LEARNING CAPABILITIES
Capabilities
Control and
Integration
Learning by
Doing
Flexible and well-managed
boundaries
Business design requirements
• Coordination and control of routine operations is embedded within the digital operating
infrastructure.
• Early warning systems enable close monitoring and immediate response to threats and
opportunities
• Critical failure factors” have been identified and “disaster recovery” procedures are in
place.
• Real-time information and interactive management systems – a mix of face-to-face
decision making supplemented by high bandwidth communication systems – enable large
dispersed teams of people to make informed decisions, take actions, and receive
immediate feedback
• Key operating metrics are directly linked to financial and market results to provide real
time feedback.
• Shared, actionable goals provide direction and the framework within which decisions can
be made and evaluated.
• Employees and partners have a clear understanding of the role they play and how to work
with others to get things done. But, these clearly defined roles must not limit people’s
ability to work across boundaries - inside the firm and with suppliers, partners and
customers.
• In a networked organization, companies are highly skilled at forming and successfully
managing strategic alliances and partnerships.
• If a company is growing by acquisition, companies must be highly skilled at identifying
and effectively integrating people, processes, and systems that unite acquired companies.

33. MANAGING AND LEARNING CAPABILITIES (CONT.)
Capabilities
Business design requirements
Flexible and wellmanaged boundaries
• Formal and informal communication systems support frequent two way
interactions inside and outside the firm.
• Coordinating mechanism (for example, advisory councils, governing boards,
liaison roles, and information systems) enable effective coordination and
control of activities that cross internal and external boundaries.
Accessible knowledge
assets
• The information needed to make decisions and take actions is relevant,
timely, and readily available to those who need it. It is presented in a form
that is immediately actionable.
• People are information literate and have the skills and incentives needed to
turn information into action that is consistent with the best interests of the
organization and its stakeholders.
• Information and best practices are openly shared.
• Politics, bureaucracy, and poorly aligned incentives do not get in the way of
sharing and learning from information.
• Processes are in place to ensure that information is accurate and reliable, and
that employees, partners, customers, and suppliers trust the information they
receive.
• Privacy and confidentiality are safeguarded and security procedures are
strictly enforced.

34. AMMARA ISHAQ

35. LEADING AND ENGAGING
While management is all about coping with complexity,leadership
is all about attracting and mobilizing the resources for change
1: Leadership involves defining a clear, compelling vision and
ensuring that is translated into a set of actionable strategies
and
initiatives.
2: Attracting, motivating, energizing, and retaining top talent
inside an organization and within partner, supplier, and
customer networks
3: Creates a culture and ensures that values, beliefs and
behaviors are deeply ingrained and reflected in the decisions
made and actions taken

36. HIERARCHAL LEADERSHIP
Emphasis managing complexity and minimizing
it.
Management process overshadowed leadership
Risk were minimized by centralizing decision
making, segregating activities and structuring
work rigidly.

37. ENTREPRENEURIAL LEADERSHIP
“Create or seize an opportunity and pursue it
regardless of the resources currently controlled”
Attract, motivate and engage people, partners
and investors in the task of working together to
create a clear and compelling vision that excites
and deeply engaged all involved.

38. NETWORKED LEADERSHIP
1 :In the Networked Economy, the free flow of information throughout
the company enhances the ability of employees, customers,
partners, and executives to share in defining both a clear and
compelling vision for change and the necessary tactical initiatives
required to achieve business goals
2: When aligned with incentives and motivations that foster
commitment rather than simply compliance.
3: In complex global organizations senior executives cannot oversee
every decision or action taken by empowered teams. So, it more
important for them to identify key strategic risks – critical success
factors – and ensure that they have effective control systems in
place.

39. LEADING AND ENGAGING

40. LEADING AND ENGAGING CAPABILITIES
Capabilities
Business Design Requirements
Visionary yet pragmatic
Leadership
• Credible leaders at all levels of the organization are able to articulate clear direction.
• Leadership is trusted and well respected and, as a result, is able to attract and retain high
quality partners and talented employees.
• “Visions” are translated into actionable strategies that can be executed and deliver results
while the window of opportunity is still open.
• Leaders are able set tangible goals and make focused decisions.
• Executives are directly involved in the business; they ensure that barriers are removed,
resources are available, and employees have the skills and motivation to accomplish
growth.
Energized participation
Skilled in conflict resolution,
negotiation and consensus
• Culture and incentives foster innovation while also ensuring a strong commitment to
delivering results. This requires that large projects be broken into smaller, more focused
deliverables, and that senior management break down barriers and realign goals.
• Employees, customers, suppliers, and partners believe that managers and other leaders
possess the knowledge, skills, and experience needed to run the business.
• “Stretch targets” energize action and motivate everyone to work at peak performance.
• Leaders display a strong commitment to career development and learning for all.
• Processes are in place to ensure that conflicting opinions are openly discussed without
becoming destructive.
• Employees and partners are skilled at negotiating “win-win” agreements
• Despite conflicting opinions, consensus decisions can be quickly reached and
implemented.

41. QAISER

42. BUILDING VALUE NETWORKS
• Building the value chain network
– Where Should Activities Be Performed?
– How Should We Relate to Market Participants?

43. BUILDING VALUE NETWORKS
Options
Vertical Integration
Selective Sourcing
Virtual Integration
Description
Locate all but the most routine, transaction-oriented activities inside the
firm.
Source selected activities from the outside. Traditionally, sourced activities
were controlled through short-term contracts.
Become part of a network of highly specialized, independent parties that
work together to perform, coordinate, and control value chain activities.

44. SEHRISH ZAMAN

45. BUILDING VALUE NETWORKS
• Building the value chain network
– How Should We Relate to Market Participants?
Basis of
Interaction
Duration of
Interaction
Level of
Business
Integration
Coordination
and Control
Information
Flow
Transaction
Discrete exchange of
goods, services, and
payments (simple
buyer/seller exchange)
Immediate
Low
Supply and demand
(market)
Primarily one way;
Limited in scope and
amount;
Low level of customization
Contract
Prior agreement governs
exchange (e.g., service contract,
lease, purchase agreement)
Usually short-term and defined
by the contract
Low to Moderate
Terms of contract define
procedures, monitoring, and
reporting
One or two way;
Scope & amount are usually
defined in the contract
Partnership
Shared goals and processes for
achieving them (e.g.,
collaborative product
development)
Usually long term and defined
by the relationship
High
Interorganizational structures,
processes, and systems;
Mutual adjustment
Two-way (interactive);
Extensive exchange of rich,
detailed information;
Dynamically changing;
Customizable

46. HOW SHOULD WE RELATE TO MARKET
PARTICIPANTS
• All firms make choices about the nature of the
relationships that they develop with
customers, suppliers, and other external
industry participants.
• .

47. HOW SHOULD WE RELATE TO MARKET
PARTICIPANTS
• Transactions involve the simple exchange of
goods, services, and payments, usually during
a specific time period and with limited
interaction or information sharing between
the parties involved.

48. HOW SHOULD WE RELATE TO MARKET
PARTICIPANTS
• In the contractual relationships, the products
or services to be provided by each party and
the length of the relationship are well defined

49. Impact of Information Technology on Market Evolution
Source: Applegate, Lynda M., Robert D. Austin, and F. Warren McFarlan, Corporate Information Strategy and Management. Burr Ridge, IL: McGraw-Hill/Irwin, 2002.
Chapter 3 Figure 3-7

50. MAJ FAWAD

51. EVOLVING MARKET STRUCTURE &
RELATIONSHIP
 In industrial economy organizations were built on
proprietary capabilities & infrastructure
 Difficult to integrate operations, share information,
coordinate and control activities
 Creation
of
walls
that
isolated
groups
within
organizations and market participants
 Firms grew complex, harder to coordinate and control

52. EVOLVING MARKET STRUCTURES &
RELATIONSHIPS
Proprietary Capabilities and Infrastructure Create Walls
Inside an Organization and Among Members of a Value Chain Network

53. EVOLVING MARKET STRUCTURE &
RELATIONSHIP
 Large firms vertically integrated
 Specialized infrastructures & capabilities further isolated
functional units
 In mid 1900s more staff
 Hierarchical reporting structures also expanded
 In late 70s industrial economy became multinational and
turned sluggish

54. Evolving Market STRUCTURE &
EVOLVING MARKET Structure &
RELATIONSHIP
Relationship
• 80s saw leveraged buyouts ,increased productivity and improved
competencies and selective sourcing
• ERP (enterprise resource planning) systems and enterprise
integration software packages for control, opening of windows within
walls
• Impact of IT in 80s and 90s was limited and applied only to most
critical processes and strategic relationships.
• IT systems were costly ,difficult to operate, maintain and change and
reuse

55. EVOLVING MARKET Structure
Evolving Market STRUCTURE &
RELATIONSHIP
Relationship
• In 21st century networked technologies provide densely
connected, flexible and robust
• Storing and sharing voice, video and data and shift to
mobile technology
• This has reduced cost and time ,increasing range of
business activities and transactions with ease

56. Evolving Market STRUCTURE &
EVOLVING MARKET Structure &
RELATIONSHIP
Relationship
• Use of advanced IT helped in establishing virtually
integrated market connecting sellers and buyers in
virtually integrated C2C internet markets.
• After dot-com demise Business-to-business
activities.
• With increased use of IT new business ways have
been evolved

57. AOL -TIME WARNER’S VIRTUAL INTEGRATION
IN VERTICALLY INTEGRATED INDUSTRY
 In 2000, AOL purchased Time Warner for US$164 billion
 Merger in January 2001 to become vertically integrated mega
corporation
 Owned content, packaging, distribution, publishing , films , sports ,
music, cable , internet and TV
 Each AOL – Time Warner business was able to focus resources and
energy towards building best in class products and services

58. AOL -TIME WARNER’S VIRTUAL INTEGRATION
IN VERTICALLY INTEGRATED INDUSTRY
• Each unit continued to distribute via traditional
channels and gained synergies from them
• Company developed new unit AOL – Time Warner
Interactive for integrating content and media channel
• Independent channel facilitators role by providing
services in Vertically integrated market

59. AOL Time War ner’s Virtu ally-Integra t ed Organization within a
Vertically-Integra ted Mar ket
Source: Applegate, Lynd a M., Rober t D. Austi n, and F. War r en McF arla n, Corporate I nfor mation Strategy and M anagement . Bur r Ridge, IL:
McGr aw-Hill/Irwin, 2002.
Chapter 3 Figur e 3-10

60. CAPT AZEEM HAFEEZ

61. Fou r Networked Ma r ket Models
Source: Applegate, Lynd a M., Rober t D. Austi n, and F. War r en McF arla n, Corporate I nfor mation Strategy and M anagement . Bur r Ridge, IL:
McGr aw-Hill/Irwin, 2002.
Chapter 3 Figur e 3-11

62. Impact of Information Technology on Market Evolution
Source: Applegate, Lynda M., Robert D. Austin, and F. Warren McFarlan, Corporate Information Strategy and Management. Burr Ridge, IL: McGraw-Hill/Irwin, 2002.
Chapter 3 Figure 3-7

63. FOUR NETWORKED MARKET MODELS
 Evolution of four networked market models
took place in 2002
 Virtual peer-to-peer networks
 Composed of individual teams & small businesses related
through market driven transactions on publicly owned
networks operated by neutral third party channels
(eg : e-Bay and Yahoo)
 Virtual Coalition networks
 Composed of businesses of varying size related through
combination of market driven transactions, contracts &
partnerships on public and privately owned networks
operated
by
joint
equity
coalitions
(eg : GHX)

64. FOUR NETWORKED MARKET MODELS
 Virtually integrated organizations within vertically
integrated markets
 Composed of independent , focused businesses and
units within an organization related through combination
of internal market driven transactions, contracts and
partnerships across privately owned networks operated
by corporate headquarters or one of its unit (eg ; AOL)
 Selective Sourcing Networks
 Composed of company’s key suppliers, customers or
partners related through combination of internal and
external market driven transactions, contracts and
partnerships across privately owned networks often
maintained by one of the parties
(eg : Wal Mart)

65. FOUR NETWORKED MARKET MODELS
 All four network models develop shared
infrastructures and capabilities
 These network models unite the three levels
of a business blueprint
 Operating and innovating
 Managing and learning
 Leading and engaging
 Done across a network of entrepreneurial
units inside and outside a firm

66. A STEP BY STEP APPROACH TO ANALYZING
MARKETS & CAPABILITIES
 Define the stream of value creating activities required to execute
strategy. Determine which activities will be performed inside
organization and which can be performed outside
 Determine the nature of relationship with customers, suppliers,
partners and others
 Define network market model most appropriate for the business and
industry
 Conduct a high level audit of the capabilities required at the three
levels of business: Asses ability to operate with precision while innovating and personalizing to
ensure best experience for customers, suppliers and partners
 Asses ability to manage routine operations with control and efficiency
 Asses ability to develop visionary yet pragmatic leaders

67. A Step by Step Approach to Analyzing Markets
& Capabilities
 Review findings and identify strength and weaknesses, findings
should be discussed with employees, customers , suppliers and
partners
 Develop a set of initiatives and prioritize, define an agenda for
change

68. CONCLUSION

69. CONCLUSION
NEED FOR
NEW CAP
INTRODUCTION
BUILDING
VALUE
NETWORKED
BLUE PRINT FOR
NETWORKED
ORGANIZATION
MNG AND
LEARNING
OPERATING
AND INNOVATION
IS HISTORY
REPEATING ITSELF
EVOLVING
MKT
STRUCTURE
HOW WE RELATE
THESE ACTIVITIES
WHERE SHOULD
ACTIVITIES BE
LEADING PERFORMED
AND
ENGAGING
MARKET
MODELS

70. QUESTIONS IF ANY

71. THANKS